Another reminder that frequent flyers schemes screw you

In case you missed it, the Sydney Morning Herald’s CBD column carries another reminder today that airline frequent flyers schemes are not there to reward you.

They are selling opportunities. They couldn’t give a kangaroo rat’s nether end whether you are loyal or not. They are there to sell you something you might have thought was ‘free’ for even more money than it would cost if you just went on on-line and did a bit of shopping.

IN SENATE estimates last week, competition czar Rod Sims was asked by Victorian Liberal senator Scott Ryan whether new laws against unfair contract terms have had any impact yet. Ryan was particularly interested to know if the ACCC had turned its eagle eye to refunds from large airlines.

It turns out airline ticketing policies are not a big area of focus. Unfortunate, because one of CBD’s colleagues is still reeling from news it would cost $667.11 to redeem a Qantas voucher worth $475. Yes, $667.11 on top of the fare paid.

The problem is the ticket was originally booked in the spouse’s name. Here’s how one of chief Qantas pilot Alan Joyce‘s helpful staff broke it down: a $65 change fee plus a $40 local service fee plus an $80 name change fee plus $482.11 to upgrade the original saver-fare to a fare that can be changed. No, no unfairness here.

Agree with moa999. Ignoring the contractual terms and conditions of a restrictive ticket you purchased, deciding it wasn’t convenient and then blaming the airline for sticking to the contractual rules which you agree to when you bought the ticket in the first place, has nothing to do with an airline’s frequent flyer program.

Also a little confused at the rant against frequent flyer programs here. In a post a few months ago Ben stated that Qantas’ program was one of the best in the world…

I maintain is one of the best. Relatively speaking. In fact incredibly good for myself, since most of the rewards were generated from American Express small business charges not flying, although that pathway to FFP nirvana is no longer available.

Moa999 is right. But my point is that this is as far as the mug punter loyalty experience is concerned an exercise in being ‘dead right’. The more people are burned or disappointed, which is what is happening as such programs evolve, the more used they will feel, and as they do the sums, which they ought to do at the outset as brother Moa explains, the less the attraction of the programs.

Back in the UK, the co-op stamp books had a declared cash value. It was fully transparent what your back-out path was: if you don’t want the offer on the table to use stamps to buy a 3x oversize school uniform your kid doesn’t want, then by all means cash in and get food instead.

In seeking to tax minimize the FF program recipients, methinks the airline managed to secure both sides of the deal: you can’t cash in, and you can’t complain. These pre-bought vouchers come with T&C which you can guarantee put you the wrong side of the deal at some point. I used on to complete a FF deal internationally, and I was happy, but I was dismayed the auto-booking engine will permit you to do an international/domestic with only 1.5h cutover time, although outside in the booking hall if you offer them less than 30minutes they won’t complete. You try guaranteeing you complete immigration and bag-receipt inside 1hr on a busy day… Oh yea.. now those T&C on the domestic leg voucher really help…

I’m confused as my link to the SMH’s CBD column has nothing to do with FF schemes.
However, I agree with complaints about ‘refund’ policies/practices: it’s high time the airlines were required to provide a simple credit for travel not undertaken with the credit being available for travel by the person in whose name the original booking was made and paid for. It’s something I would expect from any reputable retailer.

Mea culpa. There was supposed to be a paragraph at the end of the story which read:

Brand loyalty and loyalty schemes have became so entwined in recent years, that when the Angry Flyers Lounge was a regular feature of Plane Talking the need to cash up rewards to realise them as well as pay more than a new fare to salvage the value of an unusable fare became the major theme of complaints. Loyalty isn’t rewarded. It is exploited.

Ben – My vision of the modern world is that everyone is out to screw you. The advent of the highly paid manager owing allegiance only to shareholders means that every business will sail as close to the wind with advertising that they are the best while screwing every last penny out of the customer.

As has been discussed here before FF schemes are fine if you get the card virtually free, would have spent the money anyway and pay it off every month without fail. I voted with my feet when Qantas charged me the equivalent of a return air fare to London in “charges” before I could use my FF points to book a flight. From memory Virgin would have charged about $300 in charges.

First mistake is to assume FF points are free – you pay for them somewhere along the line. Each point has a commercial value that FF partners pay to airlines to participate in their scheme, it’s how they make money and why some loyalty schemes are worth more than the airline!
Best strategy is to work out how to maximise your return.
Eg: Long haul is usually always better than short haul.
Be flexible with your dates and times, book in advance and always keep checking back – redemption seat availability changes all the time.
As far as QF is concerned, you can needlessly burn points redeeming ‘classic’ however you can often achieve the same outcome with ‘any seat’ plus earn points and status credits too, just be a little flexible.
Be aware of the fare basis – there’s costs associated with any changes, even for paid fares.
You will often get different search results when you login to ‘alternate’ sites eg: I found a QF ‘exclusive business’ ‘any-seat’ for 99k QFF points SIN-SYD-CBR when i logged in to their Singapore site but the same search on the Australian site showed 650k!! Big difference! So I snapped up the seat then I reduced the points down to 60k paying what i would’ve had to pay in taxes for ‘classic’ plus i’ll earn business points and SC’s at the QFP rate.
I’m aware my loyalty costs me but i keep my eyes open so there’s no surprises.
Finally, the taxman always gets a slice of the action – seems unavoidable these days.

The “taxes” thing is a complete joke and varies significantly from airline to airline.

I’m generally pleasantly surprised how low they are when I make a domestic points booking on QF (I never bother with international points bookings as they are simply unavailable).

BA for short-haul flights is similar. 9,000 Avios and about £30 is not bad.

Contrast Miles & More (Lufthansa) which for short-haul is only useful for last-minute bookings where the fare would be €400 but you may get a return for 10,000 + up to €140 in “taxes” – if you booked ahead, you could have got a standard fare for that. So Miles & More is useful for last minute and upgrades only.

The situation covered in the SMH CBD article has nothing whatsoever to do with the QF Frequent Flyer Program.

It is simply implementation of fare rules which are fully disclosed (available for scrutiny) when a person makes a flight booking.

Readers often fail to realise that an airline seat is a very perishable product. If a passenger cancels or changes their flight close to departure date, in most cases the airline is unable to re-sell the seat and hence gets nil revenue for that seat when it is flown. That is one of the reasons why airfares have cancellation penalties and also why if you simply do not turn up for your booked flight (noshow) you forfeit the airfare. The deeper the discount provided, the more onerous the penalties applicable and booking “change fees” are a legitimate means for an airline to recover some of the lost opportunity.

Many commentators below have made reference to taxes to be paid when you redeem FF points for air travel.

To be more accurate, they are a combination of “taxes”, “fees” and “charges”.

By far the largest component within this cluster are “fuel surcharges”. These are levied by airlines separately from the base airfare and they vary greatly by airline. That is why you see such variation between the amount to be paid in money when you redeem frequent flyer points over the same route on different airlines. It is because these fees are more transparent in a redemption booking than a public fare booking, they are more noticeable. Frequent flyer point redemptions generally only cover the base airfare, although some airlines allow you to surrender more points or miles to cover the taxes fees and charges. When you use points in this way you get a fairly clear indication of what value a particular airline puts on a point or mile being redeemed.

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About this blog

A reporter since November 30, 1960, Ben Sandilands looks at what really matters up in the sky: public administration of air transport and its safety, the accountability of the carriers, and space for everyone’s knees.